Life and Health

Question 1

means to make a person whole by restoring that person to the same financial position that existed before the loss.

Answer 1

indemnify

Question 2

2 types of risk

Answer 2

pure

speculative

Question 3

means that there is only a chance of loss-loss may or may not happen. insurable risk

Answer 3

pure risk

Question 4

involves both an uncertainty of loss and gain. not insurable risk

Answer 4

speculative

Question 5

immediate specific event causing loss and giving rise to risk. it is the cause of risk.

Answer 5

peril

Question 6

any factor that gives rise to peril

Answer 6

hazard

Question 7

5 methods for dealing with risk

Answer 7

STARR
sharing
transfer
avoidance
reduction
retention

Question 8

entitles one who has paid for another’s loss to take over the other’s right to recourse from the party responsible for the loss.

Answer 8

subrogation

Question 9

the max amount the insurer will pay for a specified insured contingency.

Answer 9

limit of liability

Question 10

the number of days an insured must be disabled before disability income benefits become payable.

Answer 10

elimination period

Question 11

means that within a specified coverage range, the insured and insurer will share allowable expenses.

Answer 11

coninsurance

Question 12

what are the three major sources that insurance is provided to the public?

Answer 12

private commercial issuers, private non commercial issuers. and the US govt

Question 13

primary life insurance carriers that exist as social organizations and usually engage in charitable and benevolent activities.

Answer 13

fraternal benefit societies

Question 14

provides a meeting place and clerical services to its members who actually transact the business of insurance.

Answer 14

Lloyds of london

Question 15

term used to describe the individual who is covered by the insurance is?

Answer 15

insured

Question 16

the application of the law of large numbers enables insurers to?

Answer 16

estimate the future losses of a class of group of people

Question 17

the estimation of future losses is more accurate when information is from?

Answer 17

a large group

Question 18

what type of policy is designed to protect against the risk of living too long?

Answer 18

life

Question 19

what kind of insurance company is owned by its shareholders?

Answer 19

stock

Question 20

the abc insurance company is incorporated in alabama. while doing business in texas, it is..

Answer 20

a foreign insurer

Question 21

the abc insurance company is incorporated in mexico. while doing business in texas, it is..

Answer 21

an alien investor

Question 22

self-insurance is an example of which method of handling risk?

Answer 22

acceptance

Question 23

a social device for sprading the chance of financial loss among a large number of people is the definition of?

Answer 23

insurance

Question 24

roger refuses to travel by airplane. roger is managing the risk of being in a plane crash by..

Answer 24

avoidance

Question 25

Three major channels of regulation in the insurance industry are:

Answer 25

federal regulation state regulation self-regulation

Question 26

insurance agents are appointed by?

Answer 26

insurance companies

Question 27

ralph is a producer for hoosier insurance company. his contract states that he is allowed to put the company's logo on his business cards and the door to his office. this is an example of..

Answer 27

express authority

Question 28

Tom has always made a practice of having his policyholders mail their premium checks directly to his home address and forwarding them on to the insurer so that he is aware of anyone missing a payment and can contact policyowners directly if that should happen. His contract does not allow this practice, but the insurer is aware of the actions and has not asked him to stop. This practice is an example of

Answer 28

apparent authority

Question 29

Gina accepts the initial premium when she sells an insurance policy and sends it to the company with the application. Nothing in her contract mentions handling of initial premiums. This is an example of

Answer 29

implied authority

Question 30

Albert’s life insurance premium is due on the 10th of the month. Because he gets paid at the end of the month, he has always sent the premium in late. The insurer has been accepting his premium this way for 3 years when a new CEO comes in and decides to crack down on late premiums, canceling Albert’s policy for nonpayment of premium. Albert contests this decision legally and gets the policy reinstated. The decision to reinstate the policy is an example of

Answer 30

estoppel

Question 31

what element is not necessary for the formation of a valid contract?

Answer 31

written document

Question 32

The initial premium payment sent with an application constitutes which part of the insurance contract?

Answer 32

consideration

Question 33

Ken has paid only 4 premiums on his health insurance policy when he is hit by a car. The insurance company pays out nearly half a million dollars to cover his treatment and a lengthy stay in intensive care. This is an example of

Answer 33

aleatory contract

Question 34

Carol applies for a life insurance policy and pays the initial premium. Carol has

Answer 34

made an offer to insurer

Question 35

The insurer looks at Carol’s application and decides to offer Carol a modified policy, including an exclusion Carol did not request. The insurer has

Answer 35

made a counteroffer to carol

Question 36

the failure to disclose known facts is

Answer 36

concealment

Question 37

When one party may receive much more from the contract than that party gives in exchange, this is known as

Answer 37

aleatory

Question 38

Both parties to the contract have an affirmative duty to disclose all information relevant to the contract, whether or not it is requested. This is known as

Answer 38

utmost good faith

Question 39

The sum of money the insured pays the insurer in exchange for the benefits provided in the policy is

Answer 39

the premium

Question 40

All insurance policies may be canceled at any time by

Answer 40

the insured only

Question 41

gross premium formula

Answer 41

gross premium = mortality -interest + expenses

Question 42

net premium formula

Answer 42

net premium = mortality - interest

Question 43

loss ratio forumla

Answer 43

losses / premiums

Question 44

expenses ratio formula

Answer 44

operating expenses / premiums

Question 45

the tendency for poor risks to seek and be covered by insurance more often than average risk is..

Answer 45

adverse selection

Question 46

An insurance producer analyzed Bonita’s life insurance needs, taking into account Bonita’s net annual salary, her expenses, her current age, and depreciation of the dollar over time. This producer was using

Answer 46

the human life value approach to needs analysis

Question 47

An insurance producer analyzed Dwight’s life insurance needs, taking into account the amount of money Dwight anticipated needing for his funeral and the amount of income that would be required to maintain his family’s standard of living in the event of his death, including projected college costs and the costs of supporting his spouse. This producer was using

Answer 47

the needs approach to needs analysis

Question 48

Ana wishes to purchase enough insurance to support her husband for the rest of his life if she should die prematurely and then leave a sizeable inheritance for her children upon his death. Which method should be used to calculate the amount of insurance necessary?

Answer 48

capital conservation

Question 49

Ken has terminal cancer and wants to access the death benefit of his life insurance policy to pay medical expenses. How might he be able to do this?

Answer 49

he may access the funds either through a viatical settlement or by use of the accelerated benefits provision

Question 50

Alice decides to buy a policy. She pays the first premium; the producer issues a receipt and tells her that she is covered immediately, until she is notified that the policy is either issued or declined. What kind of receipt has Alice received?

Answer 50

binding receipt

Question 51

Brenda decides that she wants to buy a policy. She fills out the application but wants to examine the policy before actually paying any premium. What kind of receipt will Brenda receive?

Answer 51

inspection receipt

Question 52

Camille decides to buy a policy. She pays the first premium, and the producer issues a receipt and tells her that she is covered as long as the policy is issued as applied for. What kind of receipt did Camille receive?

Answer 52

conditional receipt

Question 53

Which kind of receipt is most commonly used in life insurance?

Answer 53

conditional receipt

Question 54

Insurers sometimes require personal delivery so that

Answer 54

the producer can verify the insured's good health at the time of delivery

Question 55

If payment of a valid death claim is delayed, what is the usual reason?

Answer 55

The insurer has not received proper notification of the death

Question 56

Lee applies for a policy, pays the initial premium, and receives a conditional receipt on March 14. On March 15, he passes the medical exam with flying colors. On March 16, an undiagnosed brain aneurysm bursts, killing Lee instantly. On March 17, the insurer receives the results of the medical exam, which includes no information about the aneurysm. On March 19, the insurer receives the notice of claim. The insurer will

Answer 56

pay the claim

Question 57

Rich applies for a policy, pays the initial premium, and receives a binding receipt on Friday, September 1. On Monday, September 4, the underwriting department decides not to issue the policy and places the file in a pile for notification letters to be sent out at the end of the week. On Wednesday, September 6, Rich is killed in an auto accident. On Thursday, September 7, the insurer receives the notice of claim. The insurer will

Answer 57

pay the claim because a binding receipt ensures coverage until the potential insured is notified of a rejection

Question 58

Brit purchases a policy and tells the producer he wants immediate coverage, regardless of what the underwriting outcome is. To meet Brit’s demand, the producer most likely will accept the premium and

Answer 58

set up a temporary insurance agreement

Question 59

A policy may be issued in all of the following ways EXCEPT

Answer 59

as an exchange policy, covering someone other than the original applicant

Question 60

Which of the following statements describes the best use of a producer’s time when personally delivering the policy?

Answer 60

Mrs. Ritley delivers a policy and restates the advantages of the policy and how it can be amended to meet future insurance needs.